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Moody’s lowers SA outlook to negative. Rating still 2 notches above junk.
By Ye Xie
(Bloomberg) — South Africa’s credit-rating outlook was cut to negative by Moody’s Investors Service, which said the country faces a “prolonged” period of slow growth and increasing political pressures.
Moody’s lowered the outlook from stable and maintained the country’s credit grade at Baa2, the second-lowest investment grade, according to a statement. That’s one level above the rankings of Standard & Poor’s and Fitch Ratings.
South Africa’s “increasingly weak” growth outlook is likely to continue amid “persistent structural challenges,” Moody’s analysts Kristin Lindow and Yves Lemay said in the statement. The risk of “fiscal slippages in the face of both slower growth and increasing political pressures” is increasing, they said.
Read also: Montalto: ANC helpless against ‘junk’. Zuma’s managed exit post May 2016.
South Africa’s economy, the largest on the continent after Nigeria’s, is stagnating as electricity shortages, low global demand and falling metal prices stifled output. President Jacob Zuma shocked global investors after naming two finance ministers in four days over the past week and firing a long-term incumbent, raising concern about the credibility of his economic policies.
The rand has already tumbled 20 percent in 2015 against the dollar as raw-material prices plunged, and the country faces the prospect of a U.S. interest-rate increase this week that is expected to accelerate capital outflows from developing nations.
Fitch cut the country’s grade to BBB- on Dec. 4. S&P cut it to the equivalent level in June 2014.
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